Executives for defined contribution plans have not one main fear, but two.
While they’re concerned about meeting participant retirement goals, they’re just as concerned about the potential for litigation.
PIMCO’s ninth annual defined contribution consulting support and trends survey found that 64 percent of investment consultants’ clients ranked the two concerns as either most important or second most important — and 34 percent ranked it as their top worry, more than any of the other choices.
Beyond worrying about the potential for lawsuits or for participants failing to meet retirement goals, sponsors also are concerned about managing organizational costs (21 percent put that at the top of their list, while 18 percent ranked it in second place); keeping up with their competitors (5 percent ranked it number one, and 14 percent put it in the second spot) and meeting workforce management objectives (7 percent said that was their top concern, while 5 percent put it in second place).
In addition, most consultants come down heavily on the side of active management, saying that it was “very important” or “important” in eight asset classes.
The other two asset classes, Treasury inflation-protected securities (TIPS) and U.S. large-cap equity, were the exceptions. Categories where they most advocated active management were emerging market equity (96 percent) and non-U.S. bonds (96 percent).
Consultants also are recommending stable value (89 percent) to their clients looking to change existing capital preservation options, in lieu of money market accounts, because of regulatory changes regarding the latter.
They’re wary about using plain old money market accounts these days, with 75 percent saying it was “very important” and 23 percent saying it was “important” that fiduciaries review their use of money market funds because of new SEC rules. Their second choice, after stable value, was government money market funds, which are not affected by the new regulations.
They’re not pushing in-plan retirement income choices that are backed by insurance companies — less than two thirds advocate them. In fact, they see some strong drawbacks to such options, with 96 percent criticizing their operational complexity; 96 percent criticizing their portability; 89 percent saying they’re too costly; and 88 percent citing “insufficient government support” from the Labor Department for those who choose them.
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